Alexandria, VA Estate Planning Blog

Consider advising some of your clients to consider funding a Standalone Accumulation Retirement Trust (not a Conduit Trust) with their retirement funds.

Such a strategy is especially relevant to any client that intends (either as primary, secondary, or more remote beneficiary) to leave their retirement funds to a person who has declared Bankruptcy, is likely to declare Bankruptcy, is married to a person who is at risk of filing Bankruptcy, or may themselves leave the benefits to someone that is at risk of Bankruptcy.

There are numerous bankruptcy cases that have held that Inherited IRAs are not Bankruptcy exempt if inherited by a non-spouse. Notwithstanding that the Bankruptcy Courts are divided, the argument against protection is very strong.

Planning Note: Regardless, retirement funds are subject to spousal support claims in Virginia

Possible Solution

A Standalone Accumulation Retirement Plan Trust can protect the benefits from bankruptcy, divorcing spouses, creditors, and can be designed not to disqualify the recipient from Medicaid.

Additionally, the trust assets can be dynastic, meaning that they will pass through the generations without generating a Generation Skipping Tax or being included with the beneficiaries Estate (for estate tax purposes).

If you have any clients that the aforementioned is applicable to, feel welcome to contact our office.